UPDATE 1-UK's Capita lowers 2016 profit after accounting changes

Published 2:56 AM ET Thu, 7 Sept 2017
Reuters

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EDINBURGH, Sept 7 (Reuters) - British business services company Capita, which is looking for a new CEO after a series of profit warnings, lowered its underlying operating profit for 2016 on Thursday after adopting new accounting standards.

Capita restated its 2016 operating profit at 335 million pounds ($437 million), down from 481 million pounds previously. It also reported net liabilities of 553 million pounds versus assets of 483 million pounds originally.

By adopting International Financial Reporting Standards (IFRS 15), Capita will recognize, measure and disclose revenue from long-term customers at a later date in the process than before. The new accounting method does not affect cash flow or the profitability of contracts over their lifetime, Capita said.

"We believe early adoption of IFRS 15 is a sensible step to take in this transitional year for Capita," Finance Director Nick Greatorex said.

Capita has issued a spate of profit warnings which led to the resignation of its chief executive in March and has said it did not expect its profits to increase before 2018.

The company, which provides specialist business services to banks, retailers and utilities, also said it expected its first-half results, due to be published on Sept. 21, would be as anticipated in June.

Analysts expect the company to announce a new chief executive when it releases first-half results.

Greatorex told Reuters in a phone interview that the company was making "very good progress" on its CEO search but declined to say whether an announcement would be made.

Capita's problems emerged last year as clients delayed major deals in the wake of Britain's vote to leave the European Union.

The company is trying to simplify its structure after years of acquisition-led growth and a structure which many analysts say has become difficult to manage. ($1 = 0.7668 pounds) (Reporting by Elisabeth O'Leary; editing by Kate Holton and David Clarke)